Avoid problems: Don't sign apartment lease before reading it

After Eric and Jenifer Allen started looking for their first house last August, a lot of things fell quickly into place. They found the house they wanted, a two-bedroom twin home in Mound. Eric, who had been interning at a church, was offered a paid job as youth pastor.

But there was one obstacle: their apartment lease, which was a lot harder to get out of than they'd anticipated.

Leases are legally binding contracts -- more binding than some renters realize. The St. Paul Tenants Union and the Minnesota Attorney General's Office report many calls from renters wondering if they can get out of a lease if they buy a house, receive a job transfer, get divorced, lose a roommate or experience another major change in their circumstances.

"A lot of people presume it [a lease exception] exists," said Kathleen Milner, director of the St. Paul Tenants Union. "They assume if you change your job and move it's a valid reason for getting out of the lease."

"It's not an infrequent question," said Curtis Loewe, manager in the Minnesota Attorney General's Office. "It's an assumption people make."

Some landlords may be more lenient than others when it comes to releasing a tenant from a lease. But the legal reality is that the lease is binding, regardless of the tenant's reason for wanting to leave, unless an exception is explicitly stated.

"Usually it's pretty tough to get out of a lease. If you sign on the dotted line, you're committed -- unless you can prove the landlord isn't living up to his obligations," said Jeffrey Carroll, an attorney with Carroll & Carroll, a Minneapolis firm that specializes in real estate law.

There's another escape hatch: "Dying -- that's one way of getting out of a lease, and even then you need to give 60 days' notice," Milner said.

One-year lease

When the Allens signed a one-year lease in February on the apartment they'd been renting in Crystal, they thought their situation might be temporary. "We had talked about buying a house or moving out of state . . . later this year or next," Eric said.

However, they chose a one-year lease over a six-month or month-to-month lease, primarily because the rent was considerably lower, Eric said.

In August they started looking at houses, figuring it would take them several months to find the right one and complete the buying process, he said. Instead they found one right away. The Allens gave written notice on Sept. 1 of their intent to vacate the apartment in 60 days. "[The landlord] said it was improper notice" because the lease ran until April 2000, Eric said.

The Allens' real estate agent tried to intervene on their behalf. "I've dealt with other companies. A lot of them offer lease-break fees," said Stieg Strand, an agent with ReMax A-1 Excellence in Minnetonka. "This one didn't. It was the [most iron-clad] lease I've seen."

Many Twin Cities landlords use a standard lease form approved by the Minnesota Attorney General's Office and the Minnesota Multi Housing Association, said Jack Horner, general counsel and chief lobbyist for the Minnesota Multi Housing Association. The lease has space for "additional agreements" between a landlord and tenant, Horner said, where the parties might agree to include an addendum giving the tenant an out if he or she decides to buy or build a house or receives a job transfer. "We offer sample language [for such an addendum], but they're somewhat uncommon. The standard lease doesn't deal with that," Horner said.

"It's up to the landlord's discretion," Carroll said.

Even when tenants have a "build-or-buy" or transfer clause in their lease, they must be prepared to verify that they are in fact buying a house or being transferred by presenting a copy of their purchase agreement or a letter from their employer.

The Allens' lease did include a reference to a "build-or-buy" or transfer addendum, Eric said, which would have allowed them to break the lease early provided they paid a termination fee and slightly higher rent for the term of the lease. The Allens declined the addendum without realizing that's what they were doing, Eric said. "Had we known about it [the addendum], we probably would have chosen it," he said. "My advice is, even if you read the lease, make sure you understand it. Don't assume."

That advice is echoed by the Allens' landlord. "The lease is important. Read it," said Steven Schachtman, president of Steven Scott Management Inc., a St. Louis Park company that manages 5,000 apartment units, including the Allens'. "If you don't understand it, ask [the manager to explain] . . . No question is dumb. If you don't ask, you'll pay the price."

Helping people understand that a lease is more than a casual agreement is one of the reasons Schachtman delivers speeches at high schools on how to be a well-informed renter.

Most leases contain specific information about the subjects most likely to be misunderstood by tenants, Schachtman said, such as the term of the lease. "Some people think a month-to-month lease means you only have to give 30 days notice" instead of the 60 days that is usually required. Other common topics of confusion include causes for termination by the landlord, and what's expected from the tenant at the time of move-out, he said.

Some leases offer buyout fees (often a month's rent or more) for ending a lease before the term. The lease used by Schachtman's company doesn't offer a buyout option because "if you break the lease, it defeats the whole purpose of the lease . . . The lease is a contract. The lease protects everybody."

'Where do I sign?'

In today's rental market (the Twin Cities vacancy rate for third-quarter 1999 was a low 1.5 percent, according to Apartment Search), many tenants sign first and ask questions later.

"A lot of people don't read the lease before they sign -- they're just so glad for a place," said Pam Jackson, community education coordinator for the St. Paul Tenants Union.

"You should read your lease 100 percent before you sign," Strand said. "You need to be well aware of what's in there. But people think, 'Where do I sign? I've gotta get in.' "

The low vacancy rate also gives renters less bargaining power in trying to negotiate lease terms before they sign. "The tight housing market makes it more difficult to get what you need," Horner said. "But if you're an ordinary tenant with a good [rental] record and you can pay market rate, a lot of landlords are willing to negotiate. If you go in and say, 'Look, I might have to move. What can we do about it?' most landlords would be willing to work something out."

That "something" might include adding a "build-or-buy" or transfer clause to the lease. The St. Paul Tenants Union offers sample language that tenants can use, Jackson said. Or tenants can write their own amendment, Loewe said. "It should be dated, for everyone's protection, so there are no disputes."

The tenant might ask for a month-to-month lease, even if one wasn't initially offered. But "the tenant has to be careful," Carroll cautioned. In a month-to-month lease, the landlord can terminate the agreement or raise the rent on short notice.

If the tenants are unrelated roommates, "they could seek a separate lease for each person in the household -- that avoids a tenant getting stuck for the whole rent" if one tenant leaves, said Jim Lee, staff attorney for the Mid-Minnesota Legal Assistants organization.

Such a lease could state the portion of rent each person is responsible for, Jackson said, although she conceded that many landlords might not be receptive to such an arrangement.

The flip side of the tight rental market is that it's easier to find someone willing to sublet the apartment a tenant is trying to vacate.

"Subletting is usually the easiest way [out of a lease]," Carroll said. If you think there's a possibility you might want to leave the rental property before the lease is up, "make sure there's a provision [in the lease] giving you the right to sublet." He added a caution: Even if the landlord agrees to subletting, "he probably won't release the tenant from liability, so be careful who you sublet to."

Subletting was the solution for the Allens, who found a new tenant to take over the rent as of Nov. 1. (They closed on their new home Oct. 15). The new tenant had to pay an application fee and be approved by the apartment manager.

Maintenance issues

Sometimes tenants want out of a lease because they feel the landlord is not maintaining the property adequately. But, "usually it has to be pretty bad before a tenant has the right to vacate," Carroll said.

If a tenant complains about a maintenance issue and the landlord doesn't remedy it, the tenant has several options. Withholding rent is not recommended, Lee said. Nonpayment of rent can put a permanent blemish on the tenant's rental record, which can make it difficult to rent an apartment in the future. "A better remedy is the rent escrow process," Lee said, in which the rent is deposited with a court administrator.

If you're a tenant with a serious maintenance gripe who wants to begin the rent escrow process, the first step is to formally notify the landlord, Loewe said. "Put it in writing and send it by certified mail, so it's on the record that the tenant has tried" to communicate the concerns to the landlord.

If the situation is not corrected, the next step is to ask a city building inspector to evaluate the property. "Landlords are required under state statute to keep property in reasonable repair," Lee said. If the inspector finds a violation, the inspector will take enforcement action, issuing a correction order or notice of violation, as well as stating how long the landlord has to remedy the situation.

If the tenant believes he or she is entitled to a rent rebate because of a maintenance issue, the tenant can take the matter to small claims court, Lee said. Some tenants "have every right to expect some money back. But it takes perseverance on the part of the tenant. It's always more work than it looks."

"It's my view that most tenants would rather have a good apartment than money back," Lee said.